TMI Tax Updates e-Newsletter
Jun 19,2026

Entitlement to regular bail - GST fake invoicing prosecution - Prima facie linkage with bogus ITC transactions -Proprietorship of firm and conscious involvement - Right to Speedy Trial - Appreciation of Evidence at Trial - HELD THAT: - The Court found that, although the allegation was that the applicant was instrumental in the creation and operation of the firm through which fraudulent ITC was allegedly availed and passed on, the proprietorship of that firm admittedly stood in the name of another person, and no document of unimpeachable character was shown at that stage to conclusively establish the applicant as proprietor. The material relied on by the prosecution consisted mainly of investigation statements, inter-firm financial transactions and circumstances suggesting operational control. The Court held that whether such material was sufficient to establish conscious involvement, beneficial ownership or criminal intent required detailed examination at trial and could not be conclusively determined at the bail stage. It was also noticed that the applicant had remained in custody since 14.03.2026, investigation had substantially progressed, relevant documentary and electronic material had already been seized, and further custodial interrogation did not appear necessary. [Paras 7]

On that basis, regular bail was allowed without expressing any opinion on the merits.

Final Conclusion: The Court allowed the bail application and directed release of the applicant on conditions. The grant of bail rested on the absence of conclusive material at that stage establishing proprietorship or criminal involvement, coupled with substantial progress in investigation and the lack of need for further custodial interrogation.

Taxability of the services rendered by the petitioner as a sub-contractor -Service tax demand based solely on Form 26AS - Invocation of extended limitation under the proviso to Section 73(1) of the Finance Act, 1994 - statutory preconditions - Assumption of jurisdiction - Jurisdictional error

Form 26AS as sole basis for service tax demand - HELD THAT: - The Court held that the controversy was covered by Technocom Vs. Union of India & Anr. [2026 (2) TMI 20 - GAUHATI HIGH COURT], with which it expressed full agreement. It accepted that a demand raised merely on the basis of Form 26AS entries, without independent consideration of the nature of the services rendered and their taxability, could not be sustained in law. On that basis, no further adjudication was considered necessary and the petitioner was held entitled to the same relief. [Paras 13, 14]

The order confirming service tax, interest and penalties was set aside, and the consequential recovery action based on that demand could not survive.

Extended limitation under proviso to Section 73(1) - Absence of findings on fraud, suppression or wilful misstatement - HELD THAT: - Relying on the ratio noticed from Technocom Vs. Union of India & Anr. [2026 (2) TMI 20 - GAUHATI HIGH COURT], the Court held that the extended period can be invoked only upon recorded satisfaction of the statutory conditions contemplated by the proviso. Since the issue in the present case stood covered by that decision, the assumption of jurisdiction to confirm the demand by resort to the extended period was treated as legally unsustainable. [Paras 13, 14]

The demand raised by invoking the extended period was quashed, and the attachment notices issued for recovery were also set aside.

Final Conclusion: Following the co-ordinate Bench decision in Technocom, the Court allowed the writ petition and quashed the impugned order-in-original confirming service tax, interest and penalties. The recovery notices attaching the petitioner's bank accounts were also set aside and the attachment was directed to be lifted.

Restoration of GST registration cancelled for non-filing of returns - Proviso to Rule 22(4) of the CGST Rules - Restoration on furnishing pending returns and payment of dues - Serious civil consequences of cancellation of registration - HELD THAT: - The Court found that the controversy was squarely covered by the earlier decision in Dhirghat Hardware Stores [2025 (10) TMI 1070 - GAUHATI HIGH COURT], which had interpreted the proviso to Rule 22(4) to mean that where cancellation is on account of non-filing of returns, and the registered person is ready to furnish all pending returns and pay the tax dues with applicable interest and late fee, the proper officer may drop the proceedings and pass the prescribed order. Treating the present case as similar on facts and law, the Court extended the same relief and directed that the petitioner be permitted to approach the concerned authority for restoration, whereupon the authority must consider the request in accordance with law. The Court further directed that the period under Section 73(10) would run from the date of the order, except for the financial year 2024-25, for which computation would be as per Section 44, and that arrears including tax, penalty, interest and late fee would remain payable. [Paras 11, 12, 13]

The petitioner was granted liberty to apply within the stipulated period for restoration of GST registration, and on compliance with the requirements of the proviso to Rule 22(4), the authority was directed to consider restoration expeditiously.

Final Conclusion: Following its earlier decision on similar facts, the Court disposed of the writ petition by permitting the petitioner to seek restoration of GST registration within the prescribed time and directing the competent authority to consider such request on compliance with the proviso to Rule 22(4) of the CGST Rules, 2017. Liability to pay the statutory dues was kept intact.

Delay in filing the statutory appeal -sufficient cause - Mandatory pre-deposit and appellate remedy - Garnishee recovery pending restored appeal - substantial compliance which section 107(6) - hyper technical approach

Condonation of delay in GST appeal - HELD THAT: - The Court held that the delay was sufficiently explained by the failure of the Chartered Accountant, to whom the order had been communicated, to inform the petitioner of the proceedings. It further treated payment of the mandatory pre-deposit as substantial compliance with the appellate requirement and held that rejection of the appeal solely on limitation, without considering the cause shown, amounted to a hyper-technical approach. On that reasoning, the appellate remedy could not be allowed to become illusory and the delay deserved to be condoned. [Paras 15, 16, 17, 18, 19]

The impugned order dismissing the appeal was quashed, the delay was condoned, and the First Appellate Authority was directed to admit and hear the appeal on merits.

Garnishee recovery pending restored appeal - Existing garnishee recovery proceedings were not lifted upon restoration of the appeal and were directed to continue till disposal of the appeal. - HELD THAT: - While observing that recovery after debit of the mandatory pre-deposit was contrary to the statutory scheme once an appeal is entertained, the Court balanced equities by restoring the appeal but not granting release from the existing garnishee action. The Court therefore left the recovery arrangement in place pending appellate adjudication and required expeditious disposal of the appeal. [Paras 17, 20, 21]

The garnishee proceedings, including freezing of the bank accounts, were directed to remain in force till disposal of the appeal by the First Appellate Authority.

Final Conclusion: The writ petition was disposed of by setting aside the appellate order, condoning the delay, and directing decision of the appeal on merits within a fixed time. The existing garnishee proceedings were, however, directed to continue till disposal of the appeal.

Input tax credit on Qualified Institutional Placement services - Course or furtherance of business - Investment in wholly owned subsidiary - Scope of “business” as defined in Section 2(17) - Non-application of mind and failure to consider appellant’s submissions and precedents - vague and non-speaking Order - lacks reasoned findings - Authority for Advance Ruling failed to pass a speaking order by not providing any detailed reasoning, analysis, or justification for concluding that fund raising through Qualified Institutional Placement (QIP) does not constitute “business” under Section 2(17) of the CGST Act, nor is it in the course or furtherance of business for ITC eligibility under Section 16(1)

Whether the services availed by the appellant in relation to the raising of funds through Qualified Institutional Placement (QIP) qualify for Input Tax Credit (ITC) under Section 16(1) of the CGST Act, 2017 ? - HELD THAT: - The Appellate Authority held that eligibility under Section 16(1) depends on the use of the services in the course or furtherance of business, and that such examination must be made with reference to the actual deployment of the QIP proceeds. Repayment or pre-payment of borrowings was treated as discharge of financial liabilities undertaken for business, improving liquidity, reducing interest burden, and strengthening business operations. On that basis, fund-raising through QIP was regarded as an activity incidental or ancillary to the main business within the meaning of business, and the services used for raising funds for such repayment were held to have the requisite nexus with business. The Authority also found support from the service tax decisions relied upon before it, as reflecting the principle that expenses incurred for raising finance for business operations bear a business nexus. [Paras 7]

Proportionate input tax credit attributable to the portion of QIP proceeds used for repayment or pre-payment of the appellant's borrowings was held admissible.

Input tax credit on fund-raising services - Investment in subsidiary - Distinct legal entity - HELD THAT: - The Appellate Authority held that, though the appellant asserted strategic and operational benefits from investing in its subsidiary, the immediate and proximate activity was acquisition of securities, and the claimed advantages arose only indirectly through equity participation and corporate control. Proceeding on the footing that the holding company and the subsidiary are distinct legal entities, it held that expenditure incurred by one entity cannot be claimed as input tax credit on the basis of benefit to another. It therefore concluded that the direct nexus required under Section 16(1) between the input services and the appellant's own business was absent in respect of the portion of QIP proceeds invested in the subsidiary. [Paras 7]

Input tax credit attributable to the portion of QIP proceeds utilised for investment in the wholly owned subsidiary was held inadmissible.

Final Conclusion: The appeal was partly allowed. The advance ruling was modified by holding that input tax credit on QIP-related services is admissible only proportionately to the extent the funds were used for repayment or pre-payment of the appellant's borrowings, and is not admissible to the extent the funds were invested in the wholly owned subsidiary.

Bad debt deduction - Write-off of irrecoverable debt - Provision for bad and doubtful debts

Deduction of the amount due from the debtor company denied merely because the assessee had not formally closed the individual ledger account, where the amount had been debited in the profit and loss account, corresponding entries had been made against sundry debtors, and recovery litigation was pending - HELD THAT: - The Court held that, after the Explanation inserted with effect from 1-4-1989, a mere provision for bad and doubtful debts is not allowable as deduction; however, the distinction is between a bare provision and an effective write-off.

Relying on Southern Technologies Limited [2010 (1) TMI 5 - SUPREME COURT] and Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT] the Court found that where the assessee had debited the amount in the profit and loss account and made corresponding entries showing the debt as irrecoverable, the requirement of write-off stood substantially satisfied. The pendency of recovery proceedings explained why the assessee had not expressly closed the debtor's ledger account, since such closure could prejudice the recovery action. On the facts, therefore, the claim was not one based on a mere provision, and any future recovery would remain taxable in the relevant year of recovery. [Paras 14, 17, 18, 19]

The deduction was allowable and the substantial question of law was answered in favour of the assessee.

Final Conclusion: The appeal was allowed on the bad-debt issue. The Tribunal's view disallowing the claim was set aside and the order of the Commissioner (Appeals) allowing the deduction was restored to that extent.

Reassessment after four years - Failure to disclose fully and truly all material facts - Deduction for infrastructure facility under section 80-IA - Meaning of enterprise and ownership requirement

Reassessment proceedings - Deduction for infrastructure facility u/s 80-IA - Meaning of enterprise and ownership requirement - Development of container terminal - recorded reasons denying deduction u/s 80-IA on the footing that the enterprise was owned by a foreign company and that no new infrastructure facility had been developed - HELD THAT: - The Court held that the Revenue had wrongly equated the assessee-company with the enterprise referred to in section 80-IA(4). On the facts, the relevant enterprise was the Chennai Port Bharathi Dock undertaking, which was owned by the petitioner, an Indian company, and the statutory requirement was therefore fulfilled. The second recorded reason was also found unsustainable since, while relying on the note that certain assets were taken on lease from the port trust, the Revenue had overlooked the petitioner's own substantial deployment and installation of quay gantry cranes and rubber tyred gantry cranes, as well as the consistent treatment in earlier assessments that the petitioner's business included development of the container terminal. [Paras 35, 38, 39, 41, 42]

The reasons recorded for treating the deduction under section 80-IA as inadmissible were incorrect.

Reassessment after four years - Failure to disclose fully and truly all material facts - Change of opinion - HELD THAT: - The Court applied the first proviso to section 147 and held that, since the original assessment had been completed under section 143(3) and the reopening notice was issued after expiry of four years from the end of the relevant assessment year, the jurisdictional condition of failure to make a full and true disclosure had to be satisfied. The material relied on in the recorded reasons, including the nature of the petitioner's business, the licence arrangement, its status as an Indian company, and its shareholding structure, stood disclosed in the annual report, tax audit report, Form 3CEB and the return of income. As regards the second reason also, the information relied upon was itself drawn from the annual report. The bare assertion in the reasons that there had been failure to disclose, without identifying any undisclosed material fact, did not meet the statutory requirement. [Paras 45, 46, 47, 48, 49]

The reopening was barred by the first proviso to section 147, and the notice under section 148 along with the consequential order, show cause notice and draft assessment order were liable to be quashed.

Final Conclusion: The Court allowed the writ petition and quashed the reopening notice, the order rejecting objections, and the consequential show cause notice with the draft assessment order. It held both that the recorded reasons on section 80-IA were erroneous and that, in any event, reopening beyond four years was impermissible for want of any failure to make a full and true disclosure.

Permanent establishment under Article 5 of the India-US DTAA - Royalty taxable on real income basis under Article 12 of the India-US DTAA - Effect of advance pricing agreement on arm's length royalty - Inapplicability of transfer pricing recomputation provisions to APA-based adjustment

Fixed place PE - Service PE - Agency PE - Independent entity - Whether GIA India was not a permanent establishment of GIA US in India under Article 5 of the India-US DTAA? - HELD THAT: - The Court accepted the Tribunal's factual findings that GIA India was an independent and separate legal entity rendering grading services to its own clients, bearing the attendant risks, and forwarding stones to GIA US or other group entities only where capacity or technical constraints so required. On those facts, the arrangement was not a joint venture and did not establish a fixed place PE, service PE, or agency PE of GIA US in India. As the Tribunal's findings were factual, were not shown to be perverse, and squarely negatived the Revenue's case on Article 5, the questions raised on PE did not give rise to any substantial question of law. [Paras 45, 46]

The PE questions were not entertained, and the finding that GIA India was not a PE of GIA US was allowed to stand.

Royalty paid under Article 12 - Real income doctrine - APA-determined arm's length price - Downward adjustment after refund of excess royalty - whether Only the royalty amount ultimately retained by GIA US after refund of the excess royalty pursuant to the APA could be taxed in India under Article 12 of the India-US DTAA? - HELD THAT: - The Court held that the transfer pricing provisions relied upon by the Revenue did not bar the assessee's claim. Section 92(3) could operate only where computation under Section 92(1) was made in the case of the same person, and could not be invoked by relying on computation in the case of GIA India and applying it against GIA US; further, the assessee's claim rested on actual repayment of the excess royalty. The Court further held that Section 92C(4) and its provisos apply only where the Assessing Officer determines the arm's length price under Section 92C(3), whereas in the present case the arm's length price stood governed by the APA, so those provisions had no application. Section 92CE was also held inapplicable against GIA US, being a provision dealing with the assessee's obligation of secondary adjustment and not a bar to recognising the consequence of actual refund. Applying the real income principle and construing the word "paid" in Article 12 in the light of the APA, the Court held that only the amount actually and eventually retained by GIA US could be treated as royalty paid to it. The excess royalty refunded under the APA did not remain income of GIA US; moreover, that amount had already been brought to tax in the hands of GIA India through the modified return, and taxing it again in the hands of GIA US would be incongruous. The Revenue's reliance on Kishinchand Chellaram [1962 (4) TMI 7 - SUPREME COURT] was distinguished as the controversy here turned on the amount "paid" under Article 12 and on the effect of the APA-backed refund. [Paras 72, 73, 74, 78, 79]

Questions (a) to (c) were answered in favour of the assessee, and the royalty taxable in India was confined to the amount ultimately retained by GIA US after refund of the excess royalty.

Final Conclusion: The Court upheld the Tribunal's view that GIA India was not a permanent establishment of GIA US in India and declined to entertain the Revenue's PE questions as no substantial question of law arose. On the royalty issue, it held that only the royalty ultimately retained by GIA US after refund of the excess amount pursuant to the APA was taxable in India, and accordingly answered questions (a) to (c) in favour of the assessee.

Registration as Income Tax Practitioner - Authorised representative and statutory registration - Validity of one-year practice requirement

Petitioner's application for registration as an Income Tax Practitioner was returned on the ground that he had not furnished proof of having appeared before the Income Tax Authorities for a period of not less than one year as on the date of the application - HELD THAT: - The Court held that Section 515 of the Income Tax Act, 2025 and Rules 255 to 257 of the Income Tax Rules, 2026 operate in different fields. While Section 515 read with Rule 252 enables a qualified person to act as an authorised representative, Rules 255 to 257 govern entry in the register of authorised Income Tax Practitioners and grant of a certificate of registration.

The requirement in Rule 257 of practice before the Income Tax Authorities for not less than one year is therefore a condition specifically for registration and does not curtail the independent eligibility to appear as an authorised representative.

Since the petitioner had not completed one year of practice on the date of the application, and the validity of Rule 257 had not been challenged, the return of the application was held to be lawful. [Paras 9, 10]

The one-year practice requirement for registration was upheld, and the return of the application was found valid, with liberty to submit a fresh application after completion of the prescribed period.

Final Conclusion: The writ petition was disposed of holding that eligibility to act as an authorised representative is distinct from eligibility for registration as an Income Tax Practitioner, and that the application was rightly returned for want of one year's practice. Liberty was granted to file a fresh application after completion of the prescribed period.

Amendment of e-filed writ petition - Dispensation with production of original petition - praecipe moved seeking permission to amend the Writ Petition without production of the original papers in the Writ Petition - Amendment to challenge the vires of section 147A

HELD THAT: - The Court noted that the writ petition had already been remanded by the Supreme Court with liberty to amend the petition to challenge the vires of section 147A. In the peculiar facts, particularly as the petition was e-filed and the original petition was not traceable, the Court held that the Registry should not insist on production of the original writ petition for permitting the amendment. Since the amendment only introduced the vires challenge, reverification was also dispensed with. [Paras 5, 7]

The petitioner was permitted to amend the writ petition in terms of the schedule of amendment, and the Registry was directed not to insist on production of the original petition.

Final Conclusion: On the peculiar facts of an e-filed writ petition whose original papers were not traceable, the Court permitted amendment to incorporate the challenge to the vires of section 147A and directed that the Registry should not insist on production of the original petition. Reverfication was dispensed with as the amendment was confined to the vires challenge.

Direct Tax Vivad Se Vishwas Scheme - Issuance of Form 5 - Technical error in tax portal - payment determined in Form 3 for Assessment Year 2015-16 had been made, but was wrongly reflected against Assessment Year 2014-15 due to a technical error in the portal

HELD THAT: - The Court found that there was no dispute that declarations had been filed for both assessment years, Form 3 had been issued separately, and payment had been made accordingly. The only obstacle to issuance of Form 5 for AY 2015-16 was the erroneous clubbing of that payment with Assessment Year 2014-15 on account of a technical portal error, which was admitted by the Department.

The Court held that issuance of Form 5 is not discretionary once the conditions of the scheme are fulfilled, and the Department cannot rely on its own technical error to deny the benefit of the scheme to an otherwise eligible declarant. [Paras 11, 12, 13, 14, 15]

The respondents were directed to rectify the portal error, delink the payment relating to Assessment Year 2015-16 from Assessment Year 2014-15, and issue Form 5 for Assessment Year 2015-16 upon verification of the challan; upon such issuance, proceedings for that assessment year would stand concluded under the scheme.

Final Conclusion: The writ petition was disposed of by directing rectification of the admitted technical error and issuance of Form 5 for Assessment Year 2015-16. The Court held that the Department could not deny the benefit of the scheme after payment in terms of Form 3 had been made and eligibility was undisputed.

Validity of reassessment notice beyond three years-Limitation for reassessment notice - Extended limitation based on escaped income threshold - Jurisdiction confined to reasons recorded -Escaped income below statutory threshold - Reasons recorded as foundation of jurisdiction

HELD THAT: - The Court held that, after expiry of the period prescribed under Section 149(1)(a), jurisdiction to issue notice could survive only if the case satisfied Section 149(1)(b).

On examining the order passed under Section 148A(3), the Court found that the Assessing Officer had himself quantified the alleged escaped income only under two heads, and the total so recorded was below the threshold required for invoking the extended period.

The revenue's submission that the escaped income exceeded that limit was rejected because such jurisdiction must rest on the material and quantification contained in the reasons recorded, and the AO could not travel beyond those recorded reasons to sustain the notice. As the threshold condition for the extended period was not met, the notice was without jurisdiction and time-barred. [Paras 16, 17, 18, 19, 20]

The impugned order u/s 148A(3) and the consequential notice u/s 148 were quashed, along with all consequential proceedings.

Final Conclusion: The writ petition was allowed on the ground that the reassessment notice for Assessment Year 2020-21 was barred by limitation. Since the escaped income recorded by the Assessing Officer himself did not cross the threshold necessary for invoking the extended period, the order and notice were set aside.

Short-deduction of tax on payments made to faculties - TDS u/s 194J OR 192 -Employer-employee relationship - Contract for service and contract of service - TDS on professional fees and salary

HELD THAT: - The Tribunal held that the decisive test was whether the engagement of the faculty members constituted a contract for service or a contract of service. Though the assessee prescribed working hours, maintained attendance, imposed certain rules, and restricted teaching in other institutions, those features were treated as administrative and logistical controls necessary for efficient functioning and not as conclusive proof of an employer-employee relationship.

Tribunal noted that the teachers were engaged as consultants, were paid professional fees with a variable component linked to lectures, were not entitled to statutory employment benefits such as PF, gratuity, bonus, insurance or leave encashment, were free to teach in their own manner subject to curriculum, and there was no written contract of employment.

It also considered significant that the recipients had returned the receipts as professional income under section 44ADA and the Revenue had accepted the same.

Relying on Dr. Mathew Cherian vs. Assistant Commissioner of Income-tax [2022 (10) TMI 686 - MADRAS HIGH COURT] where similar indicators were held insufficient to establish a master-servant relationship in the case of professionals, the Tribunal concluded that the faculty members could not be treated as employees and that deduction under section 194J was correctly made. [Paras 13, 14, 16, 17, 18]

The assessee could not be treated as an assessee in default for short deduction on the footing that the payments were salary; the orders under sections 201(1) and 201(1A) were quashed.

Final Conclusion: The Tribunal held that the faculty members engaged by the assessee were independent professionals and not employees, and that tax had been correctly deducted under section 194J. The orders treating the assessee as in default under sections 201(1) and 201(1A) were quashed and the appeal was allowed.

Jurisdictional satisfaction u/s 153C - Sunset clause for section 153C proceedings - Independent application of mind to seized material

Assumption of jurisdiction u/s 153C - Assessing Officer of the assessee merely reproduced the communication of the Assessing Officer of the searched person without examining or referring to the seized material as having bearing on determination of the assessee's total income - HELD THAT: - The Tribunal held that, under section 153C, the jurisdictional Assessing Officer of the other person must himself be satisfied, on examination of the seized books, documents or information, that such material has a bearing on determination of that person's total income.

In the present case, the satisfaction note only reproduced the summary table forwarded by the AO of the searched person and did not identify or discuss any specific seized document relating to the assessee. There was no indication that the AO had examined the material enclosed with the forwarding letter or independently formed the statutory satisfaction required for assumption of jurisdiction. Such reproduction of the forwarded information, without independent application of mind to the seized material, did not meet the jurisdictional requirement of section 153C. [Paras 9, 10]

The satisfaction note was held to be legally invalid and the assessment made under section 153C was quashed on that ground.

Sunset clause for section 153C proceedings - Deemed date of search for other person - Validity of Proceedings u/s 153C initiated against the assessee after 01.04.2021 - HELD THAT: - The Tribunal applied the first proviso to section 153C(1) and held that, in the case of a person other than the searched person, the reference date for search is the date on which the seized books, documents or assets are received by that person's AO. As the material was forwarded on 17.01.2023, the deemed date relevant for section 153C fell after 01.04.2021. In view of section 153C(3), which provides that nothing in that section shall apply to searches initiated on or after that date, the statutory mechanism stood barred. The Tribunal therefore held that the jurisdiction u/s 153C was extinguished by the sunset clause and could not be revived by reference to the date of search in the case of the searched person. [Paras 14, 15]

The proceedings were held to be time-barred and void for want of jurisdiction, and the assessment was quashed on this independent ground also.

Final Conclusion: The Tribunal quashed the assessments in all the appeals by holding that the jurisdiction assumed under section 153C was invalid both for want of a proper satisfaction based on seized material and because the proceedings were barred by the statutory sunset clause. In view of the decision on these legal grounds, the merits of the additions were left open.

Penalty u/s 270A for under-reported income on estimated addition - Specification of default in penalty proceedings - Misreporting of income

Imposition of Penalty u/s 270A on income estimated at a percentage of short declared turnover - HELD THAT: - The Tribunal held that section 270A contemplates two distinct defaults, namely under-reporting of income and under-reporting as a consequence of misreporting, each carrying a different penalty consequence. In penal proceedings, it was therefore incumbent on the AO to identify the precise default alleged.

The order showed uncertainty on that aspect. The Tribunal further found that the addition had been computed on an estimated basis at 8% of the short declared turnover, without rejection of the books of account, indicating that the estimation itself could not furnish the foundation for levy of penalty for under-reported income. It also held that, for treating the matter as one of misreporting, the Assessing Officer was required to indicate which specific circumstance enumerated in section 270A(9) was made out, but the penalty order did not do so. On that reasoning, the penalty was found unsustainable in law. [Paras 10, 11, 12, 13, 14]

The penalty levied was directed to be deleted.

Final Conclusion: The Tribunal allowed the appeal and held that the penalty imposed under section 270A for the relevant assessment year was unsustainable. It deleted the penalty on the ground that the addition was made on estimate and the Assessing Officer had failed to specify the exact default or establish any statutory case of misreporting.

Correct Head of income - rental receipts from letting out furnished premises - Allowability of interest deduction requiring factual inquiry

Rental receipts from furnished premises let out - "Income from House Property" or "Income from Business or Profession" - HELD THAT: - On examination of the registered leave and licence agreement, the Tribunal found that the assessee had essentially let out the premises for earning rent and had not undertaken any systematic commercial activity of running and maintaining a business centre. The agreement showed grant of the premises with incidental facilities ordinarily connected with such letting, while major repairs remained with the licensor and routine outgoings were separately dealt with.

Mere collection of GST on rent did not determine the head of income under the Income-tax Act, both enactments operating in different fields. The Tribunal therefore held that the licence fee retained the character of rental income assessable as income from house property, entitling the assessee to the statutory deduction under section 24(a). [Paras 5]

The assessment of the rental receipts as business income was reversed and the receipts were held taxable as income from house property with standard deduction allowable under section 24(a).

Interest deduction on loan used for acquisition of another property - claim for deduction of interest on the loan raised by mortgaging the let-out property, where the funds were used for acquiring another premises - HELD THAT: - The Tribunal noted that the borrowed funds had been utilised for acquisition of another property, but there was no material on record regarding the purpose for which that property was acquired and used, when it was fit for use, or the head under which any income or deemed annual value from that property was to be considered. As no proper enquiry had been made by the Assessing Officer and the necessary facts were also not brought on record by the assessee, the allowability of the interest claim could not be adjudicated on merits in appeal. [Paras 5]

The issue of allowability of interest expenses was set aside to the Assessing Officer for fresh adjudication after necessary enquiry.

Final Conclusion: The Tribunal held that the licence fee from letting out the furnished premises was taxable as income from house property and not as business income. However, the claim for interest deduction on the loan used for acquiring another property was remanded to the Assessing Officer for fresh examination, and the appeal was partly allowed for statistical purposes.

Search assessment of other person - Override of reassessment by special search provisions - Jurisdiction u/s 153C vis-a-vis sections 147 and 148 - Invalid reopening on search material -

Whether Assessment based on search material found in the search of a related person could not be framed through reassessment u/ss 147 and 148 when the assessee was an other person falling within section 153C? - HELD THAT: - Tribunal found that the very foundation of the impugned additions was the material and statements emanating from the search action, and that the assessment order in the assessee's case was substantially identical to the search assessment framed in the case of the partner. Once the Revenue treated the partner's case as a search case and relied on the same seized material for the assessee, the assessee's case, being that of an other person, had necessarily to be proceeded with u/s 153C.

The non-obstante clause in section 153C gives that provision overriding effect over sections 147 and 148; therefore, where incriminating material belonging or relating to another person is the basis of assessment, the AO has no discretion to bypass the special search machinery and invoke the general reassessment provisions instead. Since the procedure under section 153C was not followed, the notice under section 148 and all consequential proceedings were held to be without jurisdiction. [Paras 9, 14]

The additional ground was allowed, the notice under section 148 and consequential reassessment proceedings were quashed for both assessment years, and the remaining grounds were left open as academic.

Final Conclusion: The Tribunal held that, since the impugned additions were founded entirely on material and statements arising from the search action, the assessee's case could only be proceeded with under section 153C and not by reassessment under sections 147 and 148. The reassessment proceedings for AYs 2017-18 and 2018-19 were therefore quashed, and the remaining grounds were left open.

Undisclosed construction receipts - Survey admission without corroborative evidence - Business expenditure and genuineness of payment - Deemed consideration for stock-in-trade immovable property

Undisclosed construction receipts - Survey admission without corroborative evidence - Suspicion cannot substitute proof - Addition for alleged suppression of construction receipts based on variation in construction consideration in agreements with different flat purchasers - HELD THAT: - The Tribunal held that mere variation in construction consideration in agreements relating to similar flats could not, by itself, justify an inference of unaccounted receipts. The Revenue had not brought any seized material, parallel accounts, cash-flow record, purchaser enquiry, or other evidence showing receipt of on-money. The addition rested only on the assessee's survey statement and on an assumption that the higher consideration reflected the true price.

Tribunal held that an admission recorded during survey is relevant but not conclusive, and in the absence of independent corroboration it cannot alone sustain the addition. Assessee's explanation that differences arose from market conditions and customer-specific negotiations had not been disproved by objective material; hence the disallowance was based on suspicion rather than proof. [Paras 9, 10, 11, 12]

The addition towards alleged suppression of construction receipts was deleted.

Business expenditure and genuineness of payment - Commercial expediency - Disallowance on conjectures and surmises - Disallowance of payment made to M/s. Vetri Reals in connection with plot sales justification when the payment, recipient identity and banking trail were not disputed and the Revenue had not shown the transaction to be bogus or sham - HELD THAT: - The Tribunal found that the factum of payment was not in dispute, the recipient was identifiable, the payment was reflected in the sale documents and had moved through banking channels. The lower authorities disallowed the expenditure only because the assessee did not produce further evidence showing the precise nature of services. Tribunal held that this could not justify complete disallowance when the Revenue had not conducted enquiry with the recipient, had not shown that the payment was fictitious or had come back to the assessee, and had not established absence of commercial substance. It reiterated that business expenditure must be examined from the standpoint of the businessman, and unless shown to be bogus or non-business in nature, it cannot be rejected on mere suspicion. [Paras 15, 16, 17, 18]

The disallowance of the payment made to M/s. Vetri Reals was deleted.

Deemed consideration for stock-in-trade immovable property - Stamp duty value substitution - Statutory fiction under section 43CA - Addition u/s 43CA on sale of plots held as stock-in-trade sustained where the declared consideration was lower than the stamp duty value and the assessee failed to show that any statutory exception applied - HELD THAT: - Tribunal held that section 43CA creates a deeming fiction requiring substitution of the stamp valuation authority's value as the full value of consideration when the declared sale consideration for land or building held as stock-in-trade is lower than such value. Assessee did not dispute that the sale consideration disclosed in the sale deeds was below the stamp duty value, nor did he produce material to show that the stamp valuation was excessive or that any statutory exception was attracted. The plea of recession in the real estate market, though commercially plausible, could not override the express statutory mandate. In the absence of any challenge to the valuation or material warranting departure from the provision, the addition was held to be in accordance with law. [Paras 21, 22, 23, 24]

The addition under section 43CA was confirmed.

Final Conclusion: The appeal was partly allowed. The additions for alleged suppression of construction receipts and for payment made to M/s. Vetri Reals were deleted, while the addition under section 43CA was upheld.

Tax deduction at source on year-end provisions for identified professional fees - Allowance of expenditure u/s 40(a)(ia) on subsequent deposit of TDS - Chargeability of payments to offshore lawyers under section 195 and the applicable DTAA - Unascertained liability

Year-end provision for resident professional fees - Liability to deduct tax at source on identified payees - Section 40(a)(ia) disallowance - Year-end provisions made for resident professional service providers, where the services, payees and amounts were identifiable, attracted liability to deduct tax at source at the time of provisioning - HELD THAT: - The Tribunal held that, in respect of resident professional service providers, the assessee was bound to deduct tax at source when it created provisions for the exact sums payable to identified lawyers. The liability did not remain avoidable merely because the bills were received in the following year, since the provisions were neither ad hoc nor unquantified and had been debited to the profit and loss account as legal and professional fees falling within section 194J. The assessee's own earlier stand that the provisions were not contingent also disentitled it from relying on the decisions in Sanghi Infrastructure Ltd. [2018 (7) TMI 2072 - GUJARAT HIGH COURT] and Karnataka Power Transmission Corporation Ltd. [2016 (2) TMI 412 - KARNATAKA HIGH COURT]which were held inapplicable on facts. [Paras 12, 20]

The disallowance principle u/s 40(a)(ia) was upheld in respect of identified resident professional fee provisions on which tax had not been deducted at the time of provisioning.

Subsequent deposit of TDS - Allowance in year of payment of tax - Deposit before due date u/s 139(1) - whether Expenditure covered by section 40(a)(ia) was allowable in the same assessment year if the deducted tax was deposited on or before the due date for filing the return, and otherwise in the year in which such tax was actually paid? - HELD THAT: - The Tribunal applied the statutory scheme that where tax deducted at source is deposited on or before the due date under section 139(1), the corresponding expenditure cannot be disallowed for that assessment year. Where tax is deducted in a subsequent year, or though deducted is paid only after that due date, the expenditure becomes allowable in the previous year in which the tax is actually paid. On that basis, the Tribunal directed allowance for the sums in respect of the identified resident payments to the extent tax had been deposited before the due date for assessment year 2014-15, and directed allowance in assessment year 2015-16 for the balance where deposit was later made. In relation to the partly identified provision, the same principle was directed to be applied on verification. [Paras 14, 15, 16, 18, 21]

AO was directed to delete the disallowance for sums where TDS was deposited on or before the due date for assessment year 2014-15, and to allow the balance in assessment year 2015-16 or the year of actual deduction and deposit, subject to verification.

Payments to offshore lawyers - Chargeability to tax in India - DTAA benefit - Whether sums were not chargeable to tax in India and were covered by the applicable DTAA? - HELD THAT: - The Tribunal found that the assessee had specifically contended that the payments to offshore lawyers were not chargeable to tax in India and therefore did not attract any withholding obligation under section 195, but this aspect had not been examined by either the AO or the first appellate authority. Since the question turned on chargeability in India and availability of treaty benefit, the matter required fresh adjudication after the assessee establishes the relevant facts and entitlement under the applicable DTAA. [Paras 17]

The issue concerning the payments to offshore lawyers was restored to the Assessing Officer for fresh examination in accordance with law.

Reversed provision - Unascertained liability - Disallowance of expenditure - whether provision made for Sapphire Professional Services, which was reversed in the subsequent year because the amount was ultimately not payable, represented an unascertained liability and was not allowable as expenditure? - HELD THAT: - The Tribunal held that once the provision was reversed on the footing that the amount was not ultimately payable, the liability could not be treated as ascertained. On that finding, the expenditure itself was disallowable as an unascertained liability. [Paras 19]

The disallowance of the reversed provision was confirmed.

Final Conclusion: The appeal was partly allowed. The Tribunal upheld the liability to deduct tax at source on identified resident professional fee provisions, granted or directed consequential allowance depending on the timing of TDS deposit, restored the issue of payments to offshore lawyers for fresh examination, and confirmed disallowance of the reversed unascertained provision.

Leave encashment liability funded through insurance - Corporate Social Responsibility expenditure prior to statutory disallowance - Real income doctrine in disputed estate rentals - Functional test for classification of port infrastructure as plant - Disallowance for short deduction of tax at source - Employee welfare expenditure

Contribution to Leave Encashment Fund - Leave encashment liability funded through insurance - Actual payment versus mere provision - Business expenditure - allowable deduction u/s 43B - Contribution paid to SBI Life Insurance Co. Ltd. towards the leave encashment scheme for Assessment Year 2009-10 allowability - disallowance applicable to a mere provision for leave encashment liability - HELD THAT: - The Tribunal held that the assessee had not claimed deduction on the basis of a provision retained in its books, but on the basis of an actual payment made to the insurer under a leave encashment scheme, with the funds having gone out of its control. Relying on CIT v. Hindustan Latex Ltd. [2012 (6) TMI 713 - KERALA HIGH COURT] it drew a distinction between a provision for future liability and premium or contribution actually paid to an insurer which assumes the liability. It held that even if section 43B(f) is operative, such payment stands on a different footing and constitutes business expenditure, and deduction cannot be postponed until the insurer later settles employees' claims. [Paras 35, 36, 37, 38, 39]

The disallowance of contribution to the leave encashment fund was deleted and the assessee's claim was allowed.

Depreciation on demolished assets - Reduction from block of assets - Timing difference - Disallowance of depreciation on buildings and sheds demolished in Assessment Year 2012-13 - HELD THAT: - The Tribunal accepted the legal position that monies received on demolition or disposal of assets forming part of a block must be reduced from the written down value of that block. It held, however, that if such reduction had already been made in the succeeding year, the dispute would be one of timing rather than allowability, and sustaining the disallowance in the year under consideration could lead to double adjustment. Since that factual assertion required verification from the records, the matter was restored for that limited purpose. [Paras 44, 45, 46, 47, 48]

The issue was remitted to the Assessing Officer for limited verification, with deletion to follow if the subsequent-year reduction from the block is found correct.

Interest on inter-port loan - Capitalisation of accrued interest - Mercantile recognition of income - Addition on account of capitalised interest on the inter-port loan for Assessment Year 2012-13 sustained on the assumption that the capitalised portion had not been offered to tax - HELD THAT: - The Tribunal found that the lower authorities had proceeded on an incorrect premise by treating the matter as one of cash recognition of interest despite the mercantile system. On the material produced, the entire interest appeared to have been recognised in the books, with part of it later capitalised into the loan principal in accordance with the contractual terms, and not because the loan was sticky or irrecoverable. Since the documentary reconciliation placed by the assessee required factual verification from the books and schedules, the Tribunal restored the matter for that limited exercise and directed deletion if the impugned amount is found already credited and offered to tax. [Paras 65, 66, 67, 68, 69]

The issue was restored to the Assessing Officer for limited verification of the reconciliation and for deletion if the capitalised amount forms part of interest already recognised.

Corporate Social Responsibility expenditure prior to statutory disallowance - Business nexus of mandated expenditure - Prospective operation of CSR disallowance - HELD THAT: - The Tribunal held that the contribution was not a voluntary or disconnected charity payment, but was made pursuant to governmental guidelines governing major ports, which required a CSR policy, dedicated fund and activities integrated with port functioning and surrounding communities. It rejected the view that the expenditure lacked business nexus, holding that the guidelines themselves linked the spending to the operational and statutory framework of the assessee. Following Pr. CIT v. Steel Authority of India Ltd. [2023 (1) TMI 779 - DELHI HIGH COURT] and the Supreme Court order in the same case [2024 (9) TMI 224 - SC ORDER], it held that the statutory disallowance of CSR expenditure operates prospectively and did not apply to the year under consideration. [Paras 87, 88, 89, 90, 91]

The CSR disallowance was deleted and the assessee's claim was allowed.

Addition on account of Estate Rentals - Real income doctrine in disputed estate rentals - Accrual under mercantile system - Revenue recognition amid uncertainty of collection - Enhanced estate rentals billed but not realised in Assessment Years 2009-10 and 2012-13 accrual as taxable income where recovery remained subject to substantial dispute and uncertainty - HELD THAT: - The Tribunal upheld the deletion of the additions by applying the doctrine of real income. It held that under the mercantile system, book entries or billing by themselves do not create taxable income unless there is real accrual based on an enforceable and realistically realisable right to receive. Relying on CIT v. Shoorji Vallabhdas & Co. [1962 (3) TMI 6 - SUPREME COURT], Godhra Electricity Co. Ltd.[1997 (4) TMI 4 - SUPREME COURT] and the other decisions cited on disputed claims, it held that where enhanced rentals remained embroiled in prolonged litigation and their recoverability had not attained finality, the unrealised differential amount was only hypothetical income; the accounting treatment adopted was also consistent with prudence and revenue recognition principles. [Paras 113, 114, 115, 116, 117]

The deletion of additions on account of unrecovered estate rentals for both years was upheld.

Functional test for classification of port infrastructure as plant - Depreciation on Docks, Sea Walls & Piers and Railways & Rolling Stock/Locomotives - Port operational apparatus - whether Docks, sea walls, piers, wharves, railways, railway sidings and rolling stock of the port were to be treated as plant and machinery or as buildings, for depreciation purposes in Assessment Years 2009-10 and 2012-13? - HELD THAT: - The Tribunal held that the controversy was covered by precedent applying the functional test. It accepted that these assets were not passive structures serving merely as a location for business, but constituted the very apparatus through which the port carried out berthing, cargo handling and other statutory operations. Following Kandla Port Trust [2006 (4) TMI 243 - ITAT RAJKOT] and Mazgaon Dock Ltd. [1991 (3) TMI 114 - BOMBAY HIGH COURT] it held that such infrastructure satisfies the test of plant and machinery and therefore qualifies for depreciation at the higher rate claimed by the assessee. [Paras 132, 133, 134, 135, 136]

The Revenue's challenge to the higher depreciation on port infrastructure was rejected.

Disallowance for short deduction of tax at source - Consequential disallowance under section 40(a)(ia) - TDS default orders set aside - HELD THAT: - The Tribunal noted that the impugned disallowances had been made solely on the basis of the TDS orders. It referred to the coordinate Bench decision in the assessee's own case in [2017 (10) TMI 1681 - ITAT MUMBAI] where, after considering the nature of the contracts and the distinction among the relevant TDS provisions of section 194C, 194J and 194-I, the alleged defaults had been deleted. Once the very foundation for invoking section 40(a)(ia) no longer survived, the consequential disallowances could not be independently sustained. [Paras 145, 146, 147, 148, 149]

The deletion of the disallowances under section 40(a)(ia) for both years was upheld.

Disallowance of Donation and Contribution Expenses - Employee welfare expenditure - Commercial expediency - Nomenclature in books not determinative - determination of true character of staff welfare and employee-related business expenditure - HELD THAT: - The Tribunal held that the allowability of expenditure must be judged by its real nature and purpose, and not by the accounting nomenclature used in the ledger. On the material examined in appellate proceedings, the payments were found to relate to labour welfare, employee relations, staff recreational activities and participation in industry bodies connected with the functioning of the assessee. Following CIT v. B.G. Shirke & Co [2002 (12) TMI 31 - BOMBAY High Court] it held that expenditure incurred on grounds of commercial expediency for employee welfare and industrial harmony bears a direct nexus with the conduct of business and is allowable. [Paras 160, 161, 162, 163, 164]

The deletion of the disallowance of donations and contributions was upheld.

Final Conclusion: The assessee succeeded on the leave encashment fund contribution and CSR expenditure, and obtained limited remands on the depreciation claim relating to demolished assets and the addition for capitalised inter-port loan interest. The Revenue's appeals were dismissed, the deletions relating to disputed estate rentals, higher depreciation on port infrastructure, disallowance under section 40(a)(ia), and employee-welfare expenditure having been upheld.

Movement of imported goods for gamma irradiation under customs control -Customs control during movement for treatment - No clearance by movement for treatment - Interim procedural arrangement - Non-precedential direction - HELD THAT: - The Court accepted the procedure placed before it for shifting the goods to a government-approved gamma irradiation facility in a manner that preserved the safety requirements and the powers of the customs authorities. It specifically recorded that movement for treatment would not amount to clearance under the Customs Act, that the goods would continue under customs control at all times, and that transport, treatment, supervision, testing, sealing, insurance, indemnity and all consequences would remain at the importer's sole risk and responsibility. The Court further directed completion of the prescribed process within the stipulated time and clarified that the procedure was confined to the facts and circumstances of the case and was not to be treated as a precedent. Though the High Court's decision on classification was affirmed, the question of law was expressly kept open and was not finally determined in this order. [Paras 2, 3, 5, 6]

The special leave petition was disposed of by directing implementation of the prescribed case-specific procedure for gamma irradiation, without treating it as a precedent, while leaving the underlying question of law open.

Final Conclusion: The Court disposed of the matter by permitting movement of the goods for gamma irradiation under strict customs supervision and on the importer's sole risk, with completion of the process within the time fixed by the Court. The High Court's decision on classification was affirmed, but the question of law was left open for consideration in an appropriate case.

Denial of Cross-examination in customs broker licence proceedings - Violation of Regulation 17(4) of the Customs Brokers Licensing Regulations, 2018 - Breach of Natural Justice - Notice relied upon the statement of a witness against the customs broker - Vitiation of Proceedings - Procedural Fairness - HELD THAT: - The Court held that Regulation 17(4) expressly entitles a Customs Broker to cross-examine persons examined in support of the grounds forming the basis of the proceedings, and if such permission is declined, reasons must be recorded in writing. Since the show cause notice specifically relied upon the statement of one witness to frame charges and no opportunity to cross-examine that witness was granted despite a written request, there was a clear breach of Regulation 17(4). That breach was sufficient to vitiate the entire proceedings, and therefore the questions sought to be raised by the Revenue on deemed revocation and non-appearance at personal hearings did not arise for consideration in this case. The question relating to issuance of a fresh show cause notice after earlier revocation was expressly left open for an appropriate case. [Paras 4, 6, 7]

The Tribunal was justified in allowing the Customs Broker's appeal on the ground of violation of Regulation 17(4), and the Revenue's appeal was dismissed.

Final Conclusion: The appeal was dismissed on the ground that the proceedings against the Customs Broker stood vitiated by breach of Regulation 17(4) of the CBLR, 2018, owing to denial of cross-examination of a relied-upon witness. The Revenue's other proposed questions were held to be unnecessary for decision, with one of them expressly kept open for consideration in an appropriate case.

Substantial question of law - Finality of findings of fact - Customs Broker licence revocation - Breach of due diligence obligations under Customs Broker Licensing Regulations - Violation of theRegulations 10(d) and 10(e) compliance - HELD THAT: - The Court held that the impugned order was entirely fact-driven. The Tribunal, being the last fact-finding authority, had examined the material and found no evidence that the Customs Broker had failed to advise the client to comply with the law, had participated in preventing examination of the goods, or had imparted any information leading to partial production of goods for examination. The Revenue did not contend that the factual findings recorded by the Tribunal were perverse, contrary to the record, or reached by ignoring any material fact. In those circumstances, the conclusions reached by the Tribunal on the alleged breach of Regulations 10(d) and 10(e), and the consequential setting aside of licence revocation and forfeiture of security deposit, could not be interfered with in appeal. [Paras 9]

No substantial question of law arose, and the appeal was not maintainable on the factual findings recorded by the Tribunal.

Final Conclusion: The High Court held that the challenge was directed entirely against factual findings of the Tribunal on the alleged breach of Regulations 10(d) and 10(e) of the Customs Broker Licensing Regulations, 2018. As no perversity or disregard of material evidence was shown, no substantial question of law arose and the Revenue's appeal was dismissed.

Sanction of refund of Extra Duty Deposit in Special Valuation Branch proceedings - Delayed refund interest under Section 27A- Provisional assessments under the related-party import transactions - Applicability of Unjust enrichment - Consumer Welfare Fund - Mutatis mutandis

Extra Duty Deposit - Refundability on finalisation of provisional assessment - Deposit distinct from duty - HELD THAT: - The Tribunal held that the Customs Act defines only duty and does not treat Extra Duty Deposit as duty. EDD is an additional deposit taken under Board instructions in related-party valuation cases to secure timely furnishing of information during provisional assessment, and its character is not altered merely because its quantum is linked to assessable value. Where final valuation accepts the declared transaction value and the provisionally assessed duty already paid is sufficient, the EDD is not required for adjustment towards any deficiency and is therefore refundable. In the present case, the finalisation of valuation and the subsequent assessment orders showed that no further duty was payable and that the EDD was liable to be returned. [Paras 8, 9, 11]

EDD was held refundable to the appellant upon finalisation of the provisional assessments, as it was only a deposit and not customs duty retained towards any surviving deficiency.

Interest on delayed refund - Section 27A - Commencement of interest period -HELD THAT: - The Tribunal held that, although EDD is not duty, the principle underlying Section 27A applies mutatis mutandis once the refundable amount stands determined on finalisation of provisional assessment. The refund applications had remained pending, and the department could not keep them undisposed of indefinitely.

In the judgement of the Hon’ble Apex Court in the case of Ranbaxy Laboratories Limited Vs. Union of India [2011 (10) TMI 16 - SUPREME COURT], it was held that liability of payment of interest for Revenue commences from the date of expiry of three months from the date of receipt of the application for refund under Section 11B(1) of the Central Excise Act, 1944.

In the facts of this case, the effective entitlement to refund arose when the Assistant Commissioners passed the orders dated 26.03.2008 and 22.05.2008 after final assessment and directed the refundable amount, though then credited to the Consumer Welfare Fund on unjust enrichment grounds. Since the amount was ultimately sanctioned to the appellant only on 13.11.2015 and 06.11.2015, there was delay beyond the statutory three-month period. The interest period was therefore to run from expiry of three months from the respective orders dated 26.03.2008 and 22.05.2008 until the actual refund dates. [Paras 8, 9, 10, 11, 12]

The denial of interest was set aside, and interest under Section 27A was held payable on the refunded EDD from three months after the orders dated 26.03.2008 and 22.05.2008 till the actual refund dates 13.11.2015 and 06.11.2015 respectively.

Final Conclusion: The Tribunal held that the EDD paid in the related-party provisional assessment proceedings was refundable and that the department was liable to pay interest for the delay in making such refund. The impugned order was set aside to the extent it denied interest, and the appeals were allowed.

Classification of Supro XT 40 - isolated soy protein product containing calcium phosphate and lecithin - General Rules for Interpretation - Essential character - Food preparations for protein fortification - Trade parlance - HSN Explanatory Notes - Specific heading prevailing over general heading - classifiable under tariff item 3504 00 91 or 3504 00 99, Or under tariff item 2106 10 00 as a protein concentrate or textured protein substance - HELD THAT: - It is a well-settled principle of law that the classification of goods under the Customs Tariff Act, 1975 is governed by the General Rules for the Interpretation of the Import Tariff (GRI). Rule 1 of the WCO's General Rules of Interpretation states that customs classification is based on the terms of headings and relevant Section or Chapter Notes, not on titles, which serve only as reference and have no legal standing.

The Authority held that classification had to be determined by the terms of the headings, Chapter Notes and the General Rules for Interpretation. Though Heading 3504 covers protein isolates and the HSN Notes contemplate protein isolates generally having protein content of not less than 90%, the material on record showed protein content of 82% on dry basis, and the applicant's reliance on a test report for another product was found irrelevant to the product under consideration. The Authority further found that, in its imported condition, the goods were not merely soy protein isolate as such, since calcium phosphate was deliberately added through a fortification process to improve nutritional value, stability, dispersibility and functionality in acidic beverages.

The reliance placed by the applicant upon food standards prescribed under Codex Alimentarius and the FSSAI Regulations is also not determinative of tariff classification. Such standards may assist in understanding food composition and regulatory requirements; however, classification under the Customs Tariff must ultimately be governed by the wording of the tariff entries, the relevant Chapter Notes, the General Rules for Interpretation and the HSN Explanatory Notes. The fact that a product may satisfy food regulatory standards applicable to soy protein isolates does not automatically render it classifiable under Heading 3504 when, in its imported condition, it is presented as a formulated nutritional preparation.

Having regard to HSN Notes to Heading 2106 and Chapter Note 5 to Chapter 21, the goods answered more closely to a protein-based food preparation used for protein enrichment of food and beverages. On that basis, Heading 2106, and specifically tariff item 21061000 for protein concentrates and textured protein substances, was treated as the more specific description applicable to the goods in preference to Heading 3504. [Paras 5]

The product was ruled classifiable under tariff item 21061000 as protein concentrates and textured protein substances.

Final Conclusion: The application was admitted, but the applicant's claimed classification under Heading 3504 was rejected. Supro XT 40 was held to be a formulated protein-based preparation for nutritional fortification and was accordingly classified under tariff item 21061000.

Classification of B-Traxim 2C Mn-220 - Separate chemically defined organic compound - Preparations of a kind used in animal feeding - General Rules for Interpretation - Classifiable as a preparation of a kind used in animal feeding under tariff item 23099090 Or under heading 2922 as a separate chemically defined organic compound - Constant Ratio of Elements - Definitive Structural Diagram - Residual Heading - Essential Character - Preparations of a Kind Used in Animal Feeding - Trade Parlance - End Use Classification - HELD THAT: - The Authority held that entry into Chapter 29 is conditioned by Chapter Note 1(a), which applies only to a separate chemically defined organic compound, namely a substance consisting of one molecular species with a constant ratio of elements and a definitive structural diagram. On the technical material placed on record, the product did not satisfy that threshold, since its chemical identity was expressed by a variable formula, involved different amino-acid ligands, and showed fluctuating molecular parameters. Such variability was treated not as a mere impurity but as part of the product's formulation, thereby excluding classification under heading 2922. The Authority further held that Heading 2309, though residual in character, covered the subject goods because they were specifically engineered, presented and applied as a feed-use product, with the technical literature itself showing optimization for premix use and application into feed via a premixture. The HSN notes to Heading 2309 were read as encompassing preparations used in making complete or supplementary feed, including active substances such as amino acids and trace elements. Since the goods were specialized, branded and regulated as an animal nutrition solution and did not retain eligibility for Chapter 29, they were held to fall under Heading 2309. [Paras 5]

The advance ruling was answered by classifying B-Traxim 2C Mn-220 under CTI 23099090 as preparations of a kind used in animal feeding.

Final Conclusion: The Authority held that the subject goods were not separate chemically defined organic compounds eligible for Chapter 29, but specialized feed-use preparations covered by Heading 2309. The product B-Traxim 2C Mn-220 was accordingly ruled classifiable under CTI 23099090.

Transfer of the deceased's shares in the company- Maintainability of company petition - Title based on gift deeds - Failure to consider material contentions - Appointment of Court Receiver over estate assets

Share transfer disputes- Maintainability of company petition - Title based on gift deeds - legality of transfer of the deceased's shares in Mertinez Entex Industries Ltd. - directed to be agitated before the NCLT in the pending company petition, while questions of title founded on the alleged gift deeds were recognised as lying within the civil court's jurisdiction - HELD THAT: - The Court noted the possibility of conflicting findings if the dispute relating to transfer of the deceased's shares were simultaneously examined in the suit and in the pending company petition. It therefore recorded the stand of the contesting respondents that no objection would be raised to the maintainability of prayer clause (g) under Section 59 of the Companies Act, 2013 on the ground that the appellant did not hold 10% shareholding in her own name. On that basis, the Court permitted all disputes as to the legality of the share transfers to be pursued before the NCLT, clarified that prayer clause (g) and the interim reliefs connected with it should be decided irrespective of the 10% objection, and left all merits open. At the same time, it confined to the civil court the issue of title insofar as it depends on the alleged gift deeds. [Paras 8, 9, 10, 11]

The controversy relating to transfer of the shares in Mertinez Entex Industries Ltd. was left to the NCLT, subject to the clarification that objections based on the 10% threshold would not impede consideration of prayer clause (g) and connected interim reliefs, while the issue of title under the alleged gift deeds remained within the civil court's domain.

Failure to consider material contentions - Interim reliefs concerning partnership firm assets - claim for interim reliefs relating to the deceased's interest in the two partnership firms, Monica India and Sanjeev Wollen Mills - HELD THAT: - The Court found that the plaintiff's contentions regarding reliefs in relation to the two partnership firms had merely been rejected on the ground that disputes were pending before a competent court or in proceedings arising out of arbitration, without proper consideration of those contentions. Treating that as insufficient adjudication, the Court directed a fresh hearing on those reliefs. It also noted the respondents' statement that there would be no opposition to the proposed amendment insofar as it concerned subsequent developments relating to the two firms, and requested that the reliefs be reconsidered after the amendment is allowed and the proposed amendments are taken into account. [Paras 12]

The issue relating to interim reliefs concerning Monica India and Sanjeev Wollen Mills was remitted for fresh decision after allowing and considering the amendment relating to subsequent developments.

Appointment of Court Receiver over estate assets - Undisputed shareholding of the deceased - HELD THAT: - The Court noticed that, under the impugned order, the receiver had been appointed only in respect of the shares held by the deceased's HUF in Gopal Dass Jagat Ram Pvt. Ltd. Since the deceased's personal shareholding in the balance shares of that company was not disputed by any defendant, the Court extended the receivership to those shares as well. It further continued the Court Receiver in respect of the properties specifically identified in the plaint as admittedly forming part of the deceased's estate, while maintaining the plaintiff as agent of the receiver as already directed. [Paras 13, 14]

Receivership was extended to the deceased's undisputed personal shares in Gopal Dass Jagat Ram Pvt. Ltd. and continued in respect of the admitted estate properties, with the plaintiff continuing as the receiver's agent.

Final Conclusion: The appeal was disposed of by directing that the dispute over transfer of shares in Mertinez Entex Industries Ltd. be pursued before the NCLT with the stated clarification on maintainability, by remitting for fresh consideration the reliefs concerning the two partnership firms, and by extending and continuing receivership over the undisputed estate assets.

Service tax demand based solely on Form 26AS - Extended period of limitation under proviso to Section 73(1) - Unauthorized assumption of jurisdiction in service tax recovery - fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax - Applicability of the exemption claimed under Notification No. 25/2012-ST - HELD THAT: - The Court held that the controversy stood covered by Technocom Vs. Union of India & Anr. [2026 (2) TMI 20 - GAUHATI HIGH COURT], and accepted that the same principle governed the present case. It adopted the view that Form 26AS, by itself, could not constitute the sole basis for determining service tax liability without an independent inquiry into the nature and taxability of the services rendered. It further held that invocation of the extended period under the proviso to Section 73(1) required recorded findings on the statutory conditions such as fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax; in the absence of such findings, the assumption of jurisdiction was unauthorized. On that basis, the order confirming tax, interest and penalties, and the appellate order affirming it, were liable to be quashed. [Paras 11, 12, 13]

The impugned service tax demand, along with interest and penalties, was set aside as being founded on an impermissible basis and on an invalid invocation of the extended limitation period.

Final Conclusion: Following its earlier decision in Technocom, the Court allowed the writ petition and quashed the order-in-original as well as the appellate order. The consequential demand of service tax, interest and penalties for the period in question also stood set aside.

Service tax demand based solely on Form 26AS - Invocation of extended limitation without statutory findings - Assumption of Jurisdiction - Unauthorized Exercise of Power - fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax -HELD THAT: - The Court found that the controversy stood covered by Technocom Vs. Union of India & Anr. [2026 (2) TMI 20 - GAUHATI HIGH COURT], and accepted the principle laid down therein that a service tax demand cannot be sustained when it is founded solely on Form 26AS without independent examination of the nature of services rendered. It further held that invocation of the extended period under Section 73 of the Finance Act, 1994 requires recording of the statutory preconditions for such extension; in the absence of such findings, the adjudicating authority's assumption of jurisdiction is unauthorized. Since both sides agreed that the present case was governed by the same facts and law, the petitioner was held entitled to the same relief. [Paras 11, 12, 13]

The order-in-original, and consequential demand of service tax, interest and penalties, were set aside and quashed.

Final Conclusion: Following the earlier decision in Technocom on identical facts and law, the Court allowed the writ petition and quashed the order-in-original. The consequential service tax demand, interest and penalties were also set aside.

Classification of composite turnkey works contract - Vivisection of works contract - Extended period of limitation - Suppression of Facts - Bonafide Belief - Demand under Consulting Engineer's Service - Classification of Service - Principal Service Test

Composite EPC / turnkey contract - Consulting Engineer's service - Public utility construction - Vivisection of contract value - levy of service tax on execution of road, hospital and educational institution projects on turnkey basis for Government agencies was not classifiable as Consulting Engineer's service, and the fee element of the contract - HELD THAT: - The Tribunal found from the agreements, running bills and TDS material that the appellant was entrusted with complete construction and commissioning obligations, including procurement of materials, engagement of labour and sub-contractors, responsibility for quality, delivery and maintenance, with payment structured as total project cost plus a fee. On those terms, the contracts were composite EPC / turnkey works contracts and the fee represented the appellant's profit margin for execution of the project, not consideration for independent advice, consultancy or technical assistance. The Revenue proceeded throughout on the specific classification of Consulting Engineer's service; however, the evidence did not establish rendition of any such service. The works being composite public utility construction contracts, the Revenue could not vivisect the total contract and subject only the fee portion to tax under that service category. [Paras 21, 24, 26, 28, 32]

The demand was unsustainable on merits since the appellant's activity was a composite works contract and not Consulting Engineer's service, and the isolated fee component was not separately taxable under that head.

Extended period of limitation - Wilful suppression - Bona fide belief - HELD THAT: - The Tribunal held that the projects undertaken were exempt public utility works both before and after the change in the levy scheme, and the appellant could therefore entertain a bona fide belief that no service tax was payable. No evidence was shown that service tax had been collected and withheld, and the quantification itself had been derived from the appellant's books of account. In the absence of any specific material establishing wilful suppression or intent to evade, the conditions for invoking the extended period were not satisfied. [Paras 29, 30, 31, 32]

The demand for the extended period was barred by limitation and was liable to be set aside on that ground also.

Final Conclusion: The Tribunal held that the appellant's Government construction projects were composite turnkey works contracts and not Consulting Engineer's service, and that the fee element could not be separated and taxed under that head. The impugned order was set aside, and the appeal was allowed also on the independent ground that invocation of the extended period was not justified.

Service tax - Tour operator service - Territorial extent of service tax law - Tours wholly within Jammu and Kashmir - Destination-based consumption tax - Determination of service tax liability on services provided by a ‘tour operator’ with respect to tour provided for arrival and destination within the State of Jammu & Kashmir - Levy under Chapter V of the Finance Act, 1994 applied only to taxable services rendered within its territorial extent - Extended period of limitation - Suppression of facts - Reasonable cause - Valuation on back-calculation basis - HELD THAT: - The Tribunal held that, notwithstanding the widened definition of tour operator after 10.09.2004 to include planning, scheduling, organising or arranging tours by any mode of transport, the taxable service under the Finance Act, 1994 remained a service provided by a tour operator in relation to a tour, and such levy had to operate within the territorial limits of Chapter V. Since section 64 excluded the State of Jammu and Kashmir, and the tours in dispute began, were performed and ended entirely within that State, with the service being consumed there, the activity could not be brought within the service tax net merely because some planning or booking activity was undertaken outside Jammu and Kashmir.

In the identical facts of the case arising in the case of Heena Tours & Travels and Heena Enterprises Vs. Commissioner of Central Excise & Service Tax, Surat-I [2024 (9) TMI 1252 - CESTAT AHMEDABAD], the Co-ordinate Bench of the Tribunal has decided the issue in favour of the appellants on the grounds of limitation and confirming the demand for normal period, on the ground that entire activity of planning, scheduling, organizing and arranging is undertaken within the taxable territory. However, the aspect of such activities amounting to service only when it relates to a to a ‘tour’ performed within the taxable territory or consumed by the service receiver within the taxable territory, in order attract the scope of levy as ‘taxable service’ was not considered. Therefore, the said decision of the Co-ordinate Bench of the Tribunal is distinguishable to the above extent.

Since, the entire demand of service tax as proposed in the SCN and to the extent it was confirmed by the adjudicating authority has arisen from the determination of service tax liability on services provided by a ‘tour operator’ with respect to tour provided for arrival and destination within the State of Jammu & Kashmir, which have been discussed at length in the foregoing paragraphs and was held to be not liable for levy of service tax during the disputed period, the grounds for appeal filed by Revenue does not sustain.

The appellant are not required to discharge service tax liability in respect of the disputed services under the Finance Act, 1994. In the above circumstances and on the basis of the discussions, there are no strong grounds to hold that the appellant did not pay service tax in respect of any service provided to package tours for arrival and destination within the State of Jammu & Kashmir, during the disputed period from April, 2005/01.10.2005 to 30.09.2010. Therefore, no merits in the impugned order of the learned Commissioner (Adjudication) in confirmation of adjudged demands on the appellant.

The impugned demand for tour operator service in relation to tours wholly within Jammu and Kashmir was set aside in entirety, and the Revenue's appeal was dismissed as consequentially unsustainable.

Final Conclusion: The Tribunal held that services in relation to tours wholly operated within Jammu and Kashmir were outside the territorial operation of Chapter V of the Finance Act, 1994 during the disputed period. The assessee's appeal was allowed, the impugned demand was set aside in full, and the Revenue's appeal was dismissed.

Taxability of outbound tour services - Export of services -Territorial scope of tour operator service - Consequential interest and penalties - Scope of "tour operator" and "taxable service"- Strict construction of tax levy - Destination-based consumption tax

Outbound tour services - Tour operator service - Territorial nexus of taxable service - Services provided by the appellant in relation to outbound tours conducted wholly outside India, chargeable to service tax under tour operator service for the disputed period - HELD THAT: - The Tribunal held that, though the definition of tour operator was expanded from 10.09.2004 to cover planning, scheduling, organising or arranging tours by any mode of transport, the levy under Chapter V of the Finance Act, 1994 still operated only on taxable services rendered within the area to which that Chapter applied. In the case of outbound tours, the journey began outside India and ended outside India, and the tour was consumed by the traveller outside India. On a harmonious reading of sections 64, 65 and 66, such services in relation to a journey wholly outside India could not be brought within the taxable service defined in section 65(105)(n). The Tribunal also read the budget instructions of 2004 as only enlarging the mode of transport covered for package tours and not as extending the levy to tours performed wholly abroad. The Larger Bench ruling in M/s Cox & Kings Limited [2023 (10) TMI 1388 - CESTAT MUMBAI - LB] was treated as requiring examination of the actual nature of the activity, and on those facts the outbound tour activity was held to be outside the service tax net. [Paras 9, 10, 12]

The service tax demand on outbound tour services for the period in dispute was unsustainable and was set aside.

Interest and penalties dependent on principal demand - HELD THAT: - The Tribunal found that the entire dispute on interest under section 75 and penalties under sections 76, 77 and 78 arose only from the confirmed tax demand on outbound tours. Since that foundational demand was held to be not leviable, the grounds raised by Revenue concerning the period of interest recovery and the manner of penalty imposition necessarily failed. The remaining issues, including those pressed by Revenue, were therefore treated as consequential and not requiring separate examination. [Paras 11, 13]

Revenue's appeal was dismissed as consequential to the failure of the tax demand.

Final Conclusion: The Tribunal held that outbound tour services wholly performed outside India were not liable to service tax under tour operator service during the disputed period. The impugned order was set aside, the assessee's appeal was allowed, and Revenue's appeal on interest and penalties was dismissed as consequential.

Reversal of CENVAT credit under Rule 6 - Exciseability of bagasse / non-excisable goods - Withdrawal of departmental circular - ‘bagasse’ generated from the crushing of the sugarcane -Bagasse cleared for consideration during the manufacture of sugar - HELD THAT: - The Tribunal held that the controversy was no longer res integra. Following the law declared in Balrampur Chini Mills Limited vs. Union of India & Ors. [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] and Union of India vs. DSCL Sugar Limited [2015 (10) TMI 566 - SUPREME COURT], it found that bagasse is only agricultural waste or residue arising in the course of manufacture of sugar and is not a manufactured final product. Since manufacture is absent, Rule 6 of the Cenvat Credit Rules, 2004 has no application. The Tribunal further noted that the Board itself withdrew Circular No. 1027/15/2016-CX by Circular No. 1084/05/2022-CX after the decision in UOI & Ors vs. M/s. Indian Sucrose Limited [2022 (7) TMI 353 - SC ORDER], which treated the earlier circular as unsustainable in law. On that basis, the demands founded on reversal at 6% of the value of bagasse were not sustainable, and the penalty also could not survive. [Paras 5]

The Revenue's challenge to the setting aside of the demand failed, and the consequential penalty was also held unsustainable.

Final Conclusion: The Tribunal upheld the appellate orders setting aside the demand raised under Rule 6 in respect of bagasse. Holding that bagasse is not a manufactured product and that Rule 6 has no application, it dismissed the Revenue's appeals and, consequently, the penalty also failed.

Sugar cess exemption on export of sugar - Cess as duty of excise on exported goods - Notification-based exemption from cess - treatment of cess as "duty" for purposes of Notification No. 42/2001-CE (N.T.) - HELD THAT: - The Tribunal found that the Central Government had specifically exempted sugar exported out of India from the whole of sugar cess under Notification No. S.O. 585(E) dated 30.07.1993, and that the tariff entries for the relevant years also reflected complete exemption of sugar cess on exported sugar. It further noted that the departmental circular itself recognized that cess would be payable on export under bond only unless exempted by notification; in the present case such exemption admittedly existed. Since the fact of export was not disputed in the show cause notice or the impugned order, the demand of sugar cess on the exported quantity could not be sustained. The Tribunal also followed its earlier decision in Shree Madhi Vibhag Khand Udyog Sahakari Mandli Ltd. [2018 (8) TMI 543 - CESTAT AHMEDABAD] holding that sugar cess is exempt on sugar exported out of India. [Paras 5]

The demand of sugar cess on exported sugar, and the consequential interest and penalty, were set aside and the appeal was allowed.

Final Conclusion: The Tribunal held that sugar exported out of India was fully exempt from sugar cess during the period in dispute. As the fact of export was undisputed and the exemption notification squarely applied, the impugned order was set aside and the appeal was allowed with consequential relief.

CENVAT credit on furnace oil used for captive electricity generation- electricity used partly in manufacturing and partly for factory office and canteen purposes - Definition of "input" under Rule 2(k)- Demand for reversal with interest - HELD THAT: - The Tribunal held that the controversy stood squarely covered by its earlier decision in the appellant's own case [2019 (12) TMI 1016 - CESTAT KOLKATA]. Relying on that decision, it accepted that after the amendment to Rule 2(k), furnace oil used for generation of electricity for captive use qualified as input, and that such credit did not become inadmissible merely because part of the generated electricity was used in the factory office, workers' canteen or other activities connected with the smooth running of manufacture. As the facts for the disputed period were found to be no different from those already considered in the appellant's own case, the denial of credit could not be sustained. [Paras 9, 10, 11]

The appellant was held entitled to CENVAT credit on furnace oil used for generation of electricity, and the demand for reversal with interest was set aside.

Final Conclusion: Following its earlier decision in the appellant's own case, the Tribunal held that furnace oil used for captive generation of electricity remained eligible for CENVAT credit notwithstanding use of part of such electricity in the factory office and canteen. The confirmation of reversal of credit and interest was therefore set aside and the appeal was allowed.

Dishonour of cheque - Effect of Simultaneous civil and criminal proceedings - Quashing of complaint at pre-trial stage in cheque dishonour prosecution - Statutory presumption under Section 139 - Existence of a legally enforceable debt or liability - essential ingredients - rebuttable presumption

Simultaneous civil and criminal proceedings - Stay of cheque dishonour prosecution - Belated challenge to marking of documents - HELD THAT: - The Hon’ble Supreme Court in Vishnu Dutt Sharma v. Daya Sapra [2009 (5) TMI 862 - SUPREME COURT], held that there is no legal prohibition against simultaneous continuation of civil and criminal proceedings arising out of the same transaction, the Trial Court dismissed the application.

The Court found that the stay application, on its own terms, was founded on the pendency of the civil appeal and not on the marking of documents. It further noted that Exts. P1 to P6 had been marked long earlier and remained unobjected to for about two decades, making the later challenge untenable. Applying the settled principle that civil and criminal proceedings arising from the same transaction can continue simultaneously and independently, the Court held that the pendency of the civil appeal furnished no ground to halt the prosecution. [Paras 10, 11, 12, 13, 14]

The order declining stay of the complaint proceedings was upheld.

Quashing of cheque dishonour complaint at pre-trial stage - Statutory presumption of legally enforceable debt - Disputed questions of fact - HELD THAT: - In Rangappa v. Sri Mohan [2010 (5) TMI 391 - SUPREME COURT], the Hon’ble Supreme Court has held that the presumption mandated by Section 139 of the Act includes the existence of a legally enforceable debt or liability. It is observed that this presumption is rebuttable, and the accused must raise their defence at trial.

The Court held that the complaint, on its face, disclosed the essential ingredients of the offence. It reiterated that the presumption under Section 139 includes the existence of a legally enforceable debt or liability, and that such presumption is rebuttable only at trial. In view of the settled position that disputed questions concerning the issuance of the cheque and existence of liability ought not to be examined in quashing proceedings at the pre-trial stage, the Court declined to interfere with the complaint. [Paras 15, 16, 17, 18, 19]

The prayer to quash the complaint was rejected.

Expeditious trial in cheque dishonour cases - Repeated adjournments frustrating legislative mandate - The prolonged pendency of the Section 138 prosecution was contrary to the statutory object of summary and expeditious disposal, warranting a peremptory direction for early conclusion of the trial. - HELD THAT: - The Court found that, despite the legislative mandate for prompt disposal of cheque dishonour prosecutions, the matter had remained pending for over two decades with repeated adjournments and without completion of the complainant's cross-examination. Observing that such delay defeated the object of Chapter XVII of the Act and undermined confidence in the justice delivery system, the Court directed the Trial Court to conclude the complaint within a fixed time. [Paras 20, 21, 22, 23]

The Trial Court was directed to dispose of the complaint expeditiously and, in any event, within two months.

Final Conclusion: The Criminal Miscellaneous Case was dismissed. The High Court upheld the refusal to stay the Section 138 prosecution, declined to quash the complaint, and directed the Trial Court to conclude the long-pending case expeditiously within the time fixed.

Dishonour of cheque - Application of mind in summoning order - Abuse of process of court - Prima facie involvement of accused - Seeking quashing of the entire proceedings of Complaint - criminal breach of trust and intimidation arising out of non-payment of cheque amount - complaint itself did not disclose his prima facie involvement - Relevancy of statements recorded under Sections 200 and 202 CrPC - HELD THAT: - The Court held that summoning an accused is a serious matter and the Magistrate must reflect due application of mind to the allegations and supporting material before issuing process. On examining the complaint and the statement under Section 200 Cr.P.C., the Court found that the grievance was essentially that the cheque deposited by the complainant was not honoured and that, according to the complaint itself, another person was the Branch Manager at the relevant time. The material placed did not indicate the applicant's involvement in the alleged acts. In such circumstances, continuation of the criminal proceedings against the applicant was held to be an abuse of process of law. [Paras 10, 11]

The complaint proceedings and the summoning order were quashed qua the applicant.

Final Conclusion: The application was allowed. The High Court quashed the complaint proceedings and the summoning order qua the applicant on the ground that the complaint material did not disclose his prima facie involvement and his prosecution amounted to abuse of process.

Negotiable Instruments Act - Dishonour of Cheque -Compounding of offence under Section 138-Interim protection to enable settlement in cheque dishonour complaint

Compounding of cheque dishonour offence - Opportunity for compromise before trial court - HELD THAT: - Relying on the principles governing compounding of cheque dishonour cases laid down by the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H.[2010 (5) TMI 380 - SUPREME COURT] and the later guidelines noticed in Sanjabij Tari v. Kishore S. Borcar [2025 (9) TMI 1634 - SUPREME COURT], the Court held that where the dispute is monetary in nature and the accused seeks an opportunity for amicable settlement, the trial court can be approached for compounding on deposit of the prescribed percentage of the cheque amount. The applicant was accordingly directed to move an application for compounding before the court below within the time granted, whereupon the trial court was to proceed in accordance with law and pass appropriate orders keeping the Supreme Court guidelines in view. [Paras 6]

The applicant was granted time to appear through counsel before the trial court and seek compounding of the offence on deposit of 10% of the cheque amount.

No coercive measures pending consideration of compounding application - HELD THAT: - Since the Court had permitted the accused to move the trial court for compounding, it directed that no coercive measures be adopted against the accused during the stipulated period or till a decision on the compounding application, whichever was earlier. At the same time, the Court made it clear that if the applicant failed to appear for compounding, he would have to face trial and the trial court would remain free to secure his attendance in accordance with law. [Paras 7, 8]

Coercive measures were kept in abeyance for the limited period granted for seeking compounding, failing which the trial court was left free to proceed in accordance with law.

Final Conclusion: The application was disposed of by permitting the applicant to approach the trial court for compounding of the cheque dishonour complaint in the light of the Supreme Court guidelines, with limited interim protection against coercive measures. In default of such appearance, the trial court was left free to proceed against the accused in accordance with law.